Insurance fraud on the rise
Policy costs will have to increase to cover the significant rise in fraudulent claims.
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July 11 - One of the most pressing problems in the South African insurance
industry at present is the issue of insurance fraud. This matter was
discussed at length by participants in the annual Insurance Institute of South
Africa conference that was held at Sun City in June.
Industry analysts and experts heard how desperate consumers are trying to
make 'easy money' in today's tough economy by submitting false claims about
their insurances.
The Managing Director of Alexander Forbes Insurance, Gari Dombo said that
there has been a significant rise in claims against car theft and hijackings and
he believes many of these claims have been inflated or falsified, although it
was difficult to pinpoint just how many of these constituted insurance fraud.
"The challenge is that as interest rates are increasing, people are starting
to treat their insurance policies as savings accounts," explained Dombo.
These sentiments were also echoed by the Managing Director of Standard Bank
Insurance Brokers, Cliff Brooke who said his company had also noticed a sharp
increase in consumers inflating the value of their insurance claims. Other
consumers have lied about being hijacked or about goods stolen by criminals.
Brookes has put a tentative number of 1:4 in the ratio of false claims
against genuine insurance claims, although he stressed that these numbers are
not quantifiable.
This trend, according to Brookes, leaves insurance companies with no choice
but to increase the costs of their policies in order to cover all the claims -
false or otherwise.
Fraud insurance is not only exclusive to the short term insurance industry,
according to deputy ombudsman at the Office of the Ombudsman for Short Term
insurance. Hendrik Viljoen said that underwriters across the industry are
rejecting a large number of claims - a phenomenon that might not have occurred
had the economic climate been different.
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